Another small victory for Australian Government in pursuit of damages for PBS “over-payments”

Published on 30 Apr, 2017

The Australian Government has had another small victory in the most recent interlocutory decision in the clopidogrel damages enquiry, which is likely to be the test case for its claims for reimbursement of PBS “over-payments” for the patentee’s listed pharmaceutical products during the period of an interlocutory injunction restraining generic entry (and consequent price drops), where the patent was ultimately revoked.

The decision (Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2017] FCA 382 (19 April 2017)) related to a confined issue of contractual interpretation regarding terms of the settlement agreement between the patentee Sanofi and the alleged infringer Apotex. Apotex was the generic party which had been specifically restrained by the interlocutory injunction and which ultimately revoked the asserted patent on an appeal to the Full Federal Court some two years later. The Government had been a passive party to that point but became active when the matter returned before a single judge for an assessment of damages payable to parties affected by the interlocutory injunction. However, after the damages enquiry had proceeded for some time, and Apotex had filed substantial evidence from 12 witnesses (including its Australian managing director and several other of its employees) in support of its damages claim, Apotex and Sanofi reached a commercial settlement on confidential terms.

The settlement deed provided, among other things, that the witnesses who had given sworn evidence for Apotex would not give any voluntary assistance to the Government in its ongoing claim against Sanofi. In short, Nicholas J of the Federal Court held that term of the settlement deed to be unenforceable because it was contrary to the public interest and would interfere with the administration of justice. Accordingly, Apotex’s witnesses (including those who are employed by Apotex companies) are free to assist the Government in pursuing its claims, and presumably at least those who are independent experts will readily do so if compensated for their time. As Nicholas J stated:

“It is a matter for each of the Apotex witnesses to decide whether he or she wishes to participate in any interview with the Commonwealth’s solicitors. Needless to say, I expect all the parties’ legal representatives to comply with Rule 23.1 of the Conduct Rules [prohibiting solicitors from taking any step to prevent or discourage a prospective witness from conferring with an opponent or being interviewed by any other person involved in a proceeding] and I am confident they will do so.”

The decision therefore removes what could have been a significant practical barrier to the Government in proving its damages claim, although it must still convince the Apotex witnesses to cooperate.

This follows a decision in late 2015 in which the Government successfully overcame an objection raised by Sanofi that it had no valid damages claim because its entire possible compensation had been legislated for in the Therapeutic Goods Act 1989 (Cth), under which a patentee giving a false certificate that it believed its pharmaceutical patents are reasonably believed to valid could be liable to pay substantial fines. As explained in our article here (http://www.shelstonip.com/news/commonwealths-damages-claim-for-overpaying-on-patented-products-continues/), the Court held the Government is not so precluded from making its damages claim.

Overall, the Government continues to pursue its complex damages claim and the proceeding will continue onwards for many months to come, with a trial listed from 28 August to 6 October 2017 and a decision therefore likely to be more than a year away. As such, there is unlikely to be any certainty as to the risk of Commonwealth PBS damages associated with a pharmaceutical patentee obtaining an interlocutory injunction for some time yet.

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